Diabetic retinopathy is a sight threatening disease without effective therapeutic options. The diabetic metabolic insult leading to retinal vascular degeneration is proposed to involve the initial endothelial cell damage due to low-grade chronic inflammation; that is then inadequately repaired due to compromised availability and functionality of bone marrow derived endothelial progenitor cells (EPCs). We have previously demonstrated that bone marrow pathology with EPC dysfunction precedes and is necessary for retinal vascular degeneration in diabetes. We propose that a molecular metabolic link connecting both the initial inflammation in the retina and the dysfunctional EPCs involves downregulation of -3 polyunsaturated fatty acids (PUFA) with concomitant activation of the central enzyme of sphingolipid signaling, acid sphingomyelinase (ASM). Our recent study demonstrated a significant decrease in total 3-PUFAs, especially DHA, that was tightly coupled with increased inflammatory changes in the diabetic retina. DHA supplementation corrected the diabetes induced decrease in migration and proliferation in EPCs, and prevented diabetes induced retinal inflammation and retinal vessel loss. These findings fit with other studies showing potent anti-inflammatory properties of omega-3 PUFAs. Dysregulation of sphingolipid metabolism is believed to play a major role in insulin resistance, obesity and inflammation. We identified activation of ASM, the enzyme converting sphingomyelin into pro- inflammatory and pro-apoptotic ceramide, as a key element activated by diabetes in both EPCs and retinal vasculature. We found that DHA supplementation reversed increases in ASM activity in diabetic EPCs and retinal endothelial cells. ASM-/- animals were protected from vascular degeneration in retinopathy models. Based on these data we hypothesize that DHA supplementation improves the outcomes of diabetic retinopathy by: 1) preventing endothelial cell activation and subsequent damage in the retina; and 2) through improving retinal vascular repair by correcting the function of bone marrow derived EPCs. We propose that the beneficial effects of DHA are due, at least in part, to inhibition of ASM activity in retinal endothelial cells and bone marrow derived EPCs. This hypothesis will be tested in two Specific Aims. Aim 1 will address retinal endothelial specific effects and Aim 2 will address EPC specific effects of ASM in diabetes. The proposed studies will assess the potential of ASM as a target for the treatment of diabetic retinopathy. Moreover, we will identify the extend of therapeutic potential that can be achieve by retinal-specific and bone-marrow specific inhibition of ASM to determine the best therapeutic strategies.